Cameco: Fundamentally strong, technically weak
Even industry leader Cameco, the largest uranium producer in the Western Hemisphere, has suffered losses recently. Initially, the Canadian company held up relatively well compared with smaller industry rivals; since the start of the month, however, a sell-off mood has taken hold here too. Since their annual high at the end of January, the NYSE shares have lost almost 40% of their value. The overarching, long-standing bull trend has not yet been broken, but is undergoing a deep correction. The shares now cost roughly as much as they did a year ago. The next major support level is not until around USD 65. The shares therefore certainly have further room to fall in the short term.
Structurally, the business continues to be fuelled by the comeback and expansion of nuclear energy. Massive investments in AI data centres have already led to the reactivation of reactors in the US. Cameco showed its two faces in the first half of the year. In Q1, revenue was still up 7%. In the second quarter, however, maintenance work caused a decline, meaning that there was no growth in the first six months. This coming Friday, the Q3 figures will provide further insights.
Analysts are currently moderately positive to bullish on the shares. Most continue to recommend Buy. Price targets largely range between USD 125 and USD 145, representing at least 50% upside potential.
On the one hand, analysts see Cameco as the biggest beneficiary in the West of the nuclear power renaissance. On the other, they point to the long pipeline of signed supply contracts. This provides secure, relatively high margins in the coming years. Cameco also benefits from its 49% stake in Westinghouse, enabling additional income along the value chain. A counterargument is the still relatively high valuation of the shares, which have long traded at a premium to their peer group.
The chart currently also argues against buying. Investors should not try to catch a falling knife; instead, they should wait for the shares to consolidate.
Standard Uranium: Micro-cap with potential
Standard Uranium could be among the companies benefiting from a resurgence in nuclear power. The company benefits from the substantial reserves in Canada’s Athabasca Basin in Saskatchewan, where it is an active exploration player. Standard Uranium has secured a portfolio of promising projects and follows a development model designed to limit its exploration risk exposure. The company carries out early-stage work on its uranium projects, including geological mapping and sampling. These activities are significantly less expensive than a drilling programme. If a property shows potential, Standard Uranium can transfer it to another exploration company in exchange for shares and/or cash. If exploration subsequently proves successful, Standard Uranium can also benefit from predefined milestone payments.
The company uses the proceeds to advance its own Davidson River project, which is favourably located near established uranium deposits and projects, including NexGen’s Arrow and Fission Uranium’s Triple R. A summer drilling programme has been conducted at Davidson River.
Despite these opportunities, Standard Uranium’s share price is currently under pressure from broader market movements. Since its June high, the shares have lost almost half their value. Its market capitalisation has fallen to just CAD 10 million, equivalent to approximately EUR 6.3 million. For investors willing to take on risk and seeking long-term exposure to the uranium sector, this may present an opportunity to establish a position at a lower price.
Energy Fuels: Uranium Yes, Rare Earths No
Energy Fuels was one of last year’s hyped stocks. But this was not due to uranium production at the company, which is based in the Greater Denver area in Colorado. Instead, investors bet on the rare earths division, which was in extremely high demand on the stock market amid escalations in the Sino-American trade war. The shares thus reached highs of USD 27 around the turn of the year. After that, however, they fell in several stages despite strong demand for uranium and rare earths. The shares can now be bought for less than USD 8. The price decline since the peak is therefore now more than 70%.
However, the structural trends remain in place. The US and other Western countries continue to build their own supply chains for rare earths and other critical metals. The uranium business is already benefiting from global industry trends. Revenue rose 496% year on year to USD 25.1 million, driven primarily by significantly higher uranium delivery volumes. Between April and June, the company sold 310,000 pounds of U3O8 (yellowcake) at an average price of USD 80.48 per pound. However, Energy Fuels reported a USD 33.4 million loss. This was due to the company’s massive investments in building up rare earths production. Among other things, Energy Fuels acquired magnet manufacturer VAC for around USD 1.9 billion to cover the entire value chain for high-performance magnets. A mill in Utah is also being expanded.
In this respect, the US company’s shares have considerable upside potential. The market capitalisation currently stands at around USD 2 billion. The question is when investors will rediscover the stock.
Conclusion
With Cameco, investors are backing the market leader in uranium, but technically the shares do not yet offer an attractive entry point. Standard Uranium is a promising exploration play in Canada with a market capitalisation of just CAD 10 million. Energy Fuels is investing heavily in rare earths, which is eating up the profits from its uranium business.
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